The LLPs are newly formed business entities that were introduced through the LLP Act,2008 in India. The Limited Liabilities enjoy the audit exemption if the annual turnover of the LLP is less than Rs40 lakh or the capital contribution is less than Rs.25 lakhs.

The Limited Liability partnership is a basic partnership in which all the partners share limited liabilities as the LLP is set up under certain legal terms and documentation. There is a specific process as to how an individual can register his or her LLP. As there are advantages of registering as an LLP in India, there are also some disadvantages. Many of them are also unsure about the process of Winding up an LLP. Here, we are going to take a look at how to wind up an LLP in India.

Section 63,64 and 65 of the LLP Act,2008 regulates the process of winding up of the LLP. The Limited Liability Partnership winding up can be initiated voluntarily or by a tribunal. Let us take a look at both in detail.

Winding up of an LLP by the tribunal

The Winding-up of the LLP is initiated by a tribunal for the following reasons:

• The LLP wants to wind up.
• There are less than two partners in the LLP for more than 6 months
• The LLP is not in a position to pay debts
• The LLP has acted against the interest of the sovereignty and the integrity of India, the specified security of the state or public order.
• The LLP has not filed with the statement of accounts and solvency or the LLP annual returns for any five consecutive financial years with the Registrar.
• The Tribunal thinks that is just and equitable that the LLP should windup.

Voluntary winding-up of an LLP

The LLP winding-up process can be easily initiated with the approval of 3/4th of the partners. To begin with the liquidation process for the LLP the designated partners need to make a declaration that the LLP does not have any debt or that the LLP will pay the debts totally within not more than 1 year from the process of winding up of an LLP.

Also, the LLP partners need to declare that the LLP is not winding up because of any frauds. This statement of the declaration must be prepared along with the statement of the assets and the liabilities until the most recent practicable date right before making the declaration for winding up of the LLPs.

Also, a valuation of the assets that are relevant to the LLP should be prepared and submitted, in case of any assets. Voluntary winding up the LLP will be effective from the start date of passing the resolution for the reason of voluntary winding up of the LLP.

Procedure to Windup LLP

How-to Wind-up LLP?

To initiate the process of winding up of an LLP a resolution for winding up the LLP should be passed and filed with the registrar within 30 days of passing the resolution for the same. The date of passing the resolution of the winding up of the LLP the voluntary winding up shall be deemed to commence.

After the resolution for winding up of the LLP is filed with the registrar, the majority of Partners shall make a declaration that is verified by an affidavit to the effect that the LLP has no debts or that it will be in the position to pay the full debts within a period as mentioned in the declaration (This period should not exceed one year from the date of the commencement of winding up of the LLP).

Along with the affidavit that is signed by the majority of the Partners the following documents should be filed with the registrar within 15 days of passing the resolution for winding up an LLP:

• The statement of the assets and liabilities for the period from the last two accounts closure to date of winding up of LLP attested by at least two partners
• Report of the valuation of the assets of the LLP prepared by the valuer if there are any.

Winding up with the Creditors

The majority of the partners are needed to announce Form 2 stating that they have no sum unpaid or that they will clear the debts within a specified period but not exceedingly more than a year from the date of passing the resolution for the sake of winding up.

Publication of the resolution

Now after passing the resolution of winding up and receiving the consent from the creditors for winding up within 14 days, the LLP is required to publish an advertisement regarding the resolution of the winding up in a newspaper that is circulated in the territory where the registered office is located or where the office of the LLP is registered.

Appointment of the LLP Liquidator

After the approval from a majority of the partners is obtained through the resolution, a voluntary liquidator as the LLP liquidator is appointed with fixed remuneration. The liquidator will be appointed only after the approval of 2/3rd of the creditors in the value of the LLP.

The creditors also have a choice to nominate an LLP liquidator and in case of the instantaneous appointment by the creditors and the partners, the LLP liquidator that is appointed by the creditors will come to existence. If the liquidator is acting then the tribunal will be appointing an LLP liquidator.

Filing of winding up by a Liquidator

After the affairs of the LLP are fully wound up, the LLP liquidator will need to prepare a report that states how the winding-up of the LLP has been conducted and the property of the LLP has been disposed of.

In case two-thirds of the number of the Partners and creditors in value are satisfied with the report of winding up that is prepared by the LLP liquidator, then a resolution for winding up the accounts and the explanation for the dissolution must be passed by the partners.

The LLP liquidator is then required to send this LLP winding up report along with the resolution to the Registrar and file an application with the tribunal.

Dissolution

A report will be made by the LLP liquidator as soon as the affairs of the LLP are wound up. Discharging the liabilities of the LLPS mean that the liabilities have been discharged, the assets have been liquidated, a report will be made by the LLP liquidator in Form 9. This form states how the company has been wound up and also includes the final accounts closing with the detailed explanation and the property which has been disposed of. Once this approval of the partners, the creditors are sought for dissolution.

In the end, it can be concluded by saying that closing an LLP is rather a two-way process where one wants to wind up the LLP and decides to do it as well as other circumstances make one do it.

Striking off

The Limited Liability Partnership Rules, 2009 was recently amended by introducing the Limited Liability Partnership Rules,2017 with effect from 20th May 2017. Under this amendment form, LLP 24 has been introduced by the MCA and now it is possible to windup the LLP easily by just making an application to the Registrar for striking off the name of the LLP.

Before the introduction of this Limited Liability Partnership Rules,2017 the procedure for winding up an LLP used to be very long and cumbersome. But, the introduction of LLP form 24 under the new amendment has made the whole process very easy and simple.

What happens after the winding-up on an LLP?

Once the process of Winding up begins a company is not allowed to pursue its business except in case if the LLP has to complete the liquidation and the distribution of the assets. By the end of the process, the company will be dissolved and the LLP will effectively cease to exist.

Winding up is the liquidation of Company’s assets which are collected and sold in order to pay the debts incurred. When the company winding up takes place firstly the debts, expenses and costs are paid away and distributed among the shareholders.

Once the Company is liquidated it is formally dissolved and the Company ceases to exists.

Winding up is the legal mechanism to shut down a company and cease all the activites that re carried on . After the Company winding up the existence of the Company comes to an end and the assets are monitored so that the stakeholders interest is not hampered.

A Private Limited Company is an artificial judicial person and requires various compliances if the company fails to maintain these compliances there are fines and penalties or even disqualification of the Directors from further incorporating a Company. It is always a better to wind up a company that has become inactive or where there are no transaction.

THe shareholders of the Company can initiate the winding up of the company anytime. If there are secured or unsecured creditors or employees on roll then all the dues need to be settled. After settling the dues it is necessary to close all the Compamny bank accounts. The GST registration must also be surrendered in case of Company wind up.

Once all the registration are surrendered the winding up application petition can filed with the Ministry of corporate affairs.

Types of Company windup

What are the different ways in which an individual can windup a Company?

A company can be wound up in two different ways-

• Voluntary winding up of a Company
• Compulsory winding up of a company

1. Voluntary Winding up of a Company

The Winding up of a Company can be done voluntarily by the members of the Company, if :

• The company passes a special resolution for winding up the Company.
• The Company in general meeting passes a resolution which requires a company to wind up voluntarily as a result of the expiry of the period of its duration, any as per the Articles of Association or on the occurrence of any event in respect of which the articles of association provide that the company should be dissolved.

Procedure for Voluntary winding up of a Company

• Convene a board meeting with the Directors in which a resolution should be passed with a declaration by the directors that they have made an enquiry in the affairs of the Company and the company no debts or the Company will pay from the precedes of the assets sold in the voluntary wind up of the company.
• Notices should be issued in writing to call for the general meeting of the Company proposing the resolutions, with a suitable explanatory statement.
• Pass the ordinary resolution for winding up of the Company in the generally meeting by ordinary majority or special resolution by 3/4 majority. The Winding up of the Company shall commence from the date of passing the resolution.
• A meeting of the creditors should be conducted on the same day or the next day of passing the resolution regarding winding up. If the 2/3rd value of the creditors are of the opinion that it is in interest of all parties to windup the Company, the the Company can wound up voluntarily.
• Within 10 days of passing the resolution for company winding up , a notice for appointment of liquidator must be filed with the registrar.
• Within 30 days of the general meeting for the winding up the certified copies of the ordinary or special resolution passed in the general meeting for the winding up of the Company.
• The affairs of the company need to be wind up and prepare the liquidators account of the Winding up account and to get it audited.
• Call for the final General meeting of the Company.
• A special resolution should be passed for the disposal of the books and the papers of the company when the affairs of the company are completely wound up and it is about to be dissolved.
• Within two weeks of the general meeting of the Company, file a copy of the accounts and file and the application to the tribunal for passing an order for the dissolution of the company.
• The tribunal shall pass an order dissolving the company within 60 days of receiving the application.
• The company liquidator is required to file a copy of the order with the registrar.
• The registrar will then on receiving the copy of the order passed by the Tribunal then publish a notice in the official gazette that the Company is dissolved.

2. Compulsory winding up of a Private Limited Company

Tribunal is responsible for this kind of wind up of Companies.

Here are the reasons for the same:

• Unpaid debts of a Company
• When a special resolution is passed fort winding up
• An unlawful act by a company or the management of the Company
• If the company is involved in fraudulent acts or misconduct
• If the annual returns or financial statements are not filed for five consecutive years with the ROC
• The Tribunal is of the view that the company should windup.

Procedure for compulsory winding up of a Company

Step:1 Is to File a petition to the tribunal along with the statement of the affairs of the Company that is to wind up.

Step:2 The tribunal will either accept or reject the petition if the person other than company files a petition then the tribunal may ask the company to file objection. it goes along with the statement of affairs within 30 days.

Step:3 Liquidator needs to be appointed by the tribunal for the winding up process. The liquidator carries out the function of assisting and monitoring the liquidation proceedings.

Step:4 Liquidator is supposed to prepare a draft report for approval. when the draft report gets approved he shall submit the final report to the tribunal for passing the winding up order.

Step:5 It is necessary of the liquidator to forward a copy to the ROC within 30 days,If he fails to do so then he will get a penalty.

Step:6 If the ROC finds the draft satisfactory he then approves the winding up of the Company and the name of the Company is striked from the register of Companies.

Step:7 ROC sends notice for Publication in the official gazette of India

Top reasons why companies wind up

What are the top reasons why Companies windup ?

A private Limited Company is a legal entity established under the Companies Act. Therefore, a company is required to maintain the regular compliances throughout the life cycle.

The process of winding up is for a Company that is not active and avoid the compliance responsibilities.

A company can also be closed by filing an application with the ministry of corporate finances in about 3 to 6 months. This process can happen online enitrely. The process for closing a company is fast and easy if done through Indiafilings.

If a company doesn’t file the compliances on time incurs fine and penalty including debarring the Directors from starting another Company. In that way it is better to windup a company that is inactive and avoid the potential fines or liability in future.

As compared to the maintainance of compliances for a dormant company it is actually to be wind up a company again when the time is right. With Indiafilings winding up is can be done just at Rs.15899

A company that maintained proper compliances can be liquidated easily. Incase of any over dues of complainces it is necessary to regularize them first. However, it is tonbe noted thata all the registartions aslo need to be surrendered.

Each business needs more funds over time to run business. These funds can be required on a long- and short-term basis. A short-term need can be satisfied by taking loans and advances. But for the run, the company will require more funds. For a Private Limited Company, this can be done by increasing the authorized capital of the company. Since the private limited company is governed and regulated under the Company Act to make changes in the structure it is necessary to follow the Act and the rules stated.

While registering the Private Limited Company the authorized and paid-up capital is specified in the MOA of the company. The company can therefore issue new shares within the limit of the authorized capital mentioned in the MOA. If the company wishes to issue more shares than the limit that is specified then amendments need to be done in the MOA.

What is authorized capital?

According to Section 2 (8) of the Companies Act, 2013 “Authorized Capital” is the capital that is authorized by the memorandum of the company to be the maximum amount of the share capital of the company.

The company can expand its business to the level of the authorized capital. In case the company has to expand the business infusing more funds than at first, the company has to increase the authorized capital by following the steps that are mentioned in this article.

Authorized Share Capital increase

A company may need to increase the authorized share capital before it is issuing new equity shares and increasing the paid-up capital. As authorized share capital is the total value of the shares a company can issue. The paid-up capital is the total value of the shares of the company that have been issued.

The Paid-up capital does not exceed the authorized capital. Hence, if the company has authorized capital of Rs.10 lakh and paid-up capital of Rs.10 lakhs would like to induct new shareholders then it can be done by:

• Increasing the Authorized share capital and issuing new shares (or)
• Transferring shares from the existing shareholders to the new shareholders.

In most cases after the new shares are issues the authorized capital increases. Connect with our advisors at sales@indiafiilngs.com for assistance with increasing the authorized share capital.

How to increase the authorized share capital of the company?

Verify AOA of the Company

Before starting with the procedures for increasing the authorized share capital it is necessary to verify the AOA to ensure that there is a provision in the Articles of Association referring to the increase of the authorized share capital. If there is no such provision then the company must first make changes to the AOA of the company.

Note: Most of the AOA’s have the provision for increasing the authorized share capital of the company.

Convene a Board Meeting

It is necessary to convene a Board meeting by providing notice to Director to increase the authorized share capital of the company. At the Board meeting, it is necessary to obtain approval from the Board of Directors for increasing the authorized share capital.

After this whole procedure, a date should be fixed to conduct an Extra-ordinary General meeting to obtain the approval of the shareholders for increasing the authorized share capital and make changes to the MOA of the Company.

At last get the approval of the Board of Directors, the company secretary who is present at the meeting to present the notice of Extraordinary general meeting to the shareholders. Basing the approval, the notice of extraordinary general meeting should be presented to all the shareholders, directors, and auditors of the company.

Extra-Ordinary General Meeting

Conduct the extraordinary general meeting and obtain the approval of the shareholders to increase the authorized share capital on the time, date, and place that is mentioned on the notice.

The approval of the shareholders to increase the authorized capital must be in the form of an ordinary resolution.

File ROC Forms

After the ordinary resolution is passed at the Extraordinary general meeting Form SH7 should be filed by the company within 30 days of passing the ordinary resolution. The prescribed government fee for the authorized capital must be paid and the documents mentioned below must be attached.

• Notice related to the Extraordinary General Meeting
• Authorized True copy of the ordinary resolution
• The changed Memorandum of Association (Which depicts the higher authorized capital)

If the procedure mentioned in the Companies Act and the Companies Rules are followed to increase the authorized capital of the company then the registrar would approve the filing and increase the authorized share capital of the company. The new authorized share capital will be reflected on the MCA portal.

Allotment of Shares

Once the authorized share capital is increased the paid-up share capital of the company can be increased by issuing the fresh equity shares.

The registered office of a company is a place where all the communication related to business is held. In addition to a registered office, a company can also have a corporate office, branch, factory, or administrative office. However, the registered office of a company in India must be registered with the Ministry of Corporate Affairs, the other branches and offices can be opened by a company without any prior intimation to the ROC.

The registered office of the company in India will determine the domicile of the company (state of Incorporation). The ROC will be determined by the state or location in which the registered office of the company is located. In case there is a change of address in the registered office of a company the ROC must be notified within 15 days.

Why is the registered office address important?

While incorporating a Private Limited Company it is important to declare the registered office of the Company and to submit the relevant documents. Here is the list of documents to be submitted while declaring a registered office of a company during the incorporation of the company:

• Electricity Bill/Water Bill/ Property Tax Receipt.
• NOC from the Landlord in case if the place is rented.
• Rent or the lease agreement between the landlord and the company.

The name and the address on the electricity bill/water bill/ property tax receipts should exactly match the NOC certificate by the landlord and the rental agreement. There is no such requirement for the registered office to be a commercial or industrial property. Also, the registered office cannot be vacant land or a building that is under construction. The registered office of a company can also be a residential property.

If the company has not decided the registered office of the company while filing for incorporation. The Companies Act,2013 also provides the option for the company to declare a temporary address. The registered office of the company should be declared by filing INC22 within 15 days of incorporating a company.

How to change the address of the registered office?

After the registered office of a company is declared by Filing the INC 22. In case there are any changes in the registered office of the company it must be intimated to the ROC. If the change in the registered office address is within the same area of city or town or village it must be notified within 15 days by filing the relevant forms.

If the change of the registered office address is outside the limits of the city or town or village then the registered office must approve a special resolution passed by the company. Suppose the registered office of the company is to be changed from one jurisdiction of a ROC to another jurisdiction, then the change should be approved by the Regional Director of the ROC. Visit www.indiafilings.com to know more about the address change of a registered office.

Types of changes in a registered office

A Company would want to change its office after some time. The registered office of a company needs to be changed with prior intimation. MCA has provided procedures to change the address of the company, this must be followed by the company.

Types of changes in the address of the registered office.

• Within the same city
• Within the same state and ROC
• To other ROC in the same state
• From one state to another

We will have a detailed look here:

Change in the registered office within the same city

The process to change the registered office in the same city is very simple.

• Firstly, the company must arrange a board meeting and pas a resolution about the same.
• The company needs to file a form INC22 with the MCA. It should be filed within 30 days of passing the board resolution.
• The utility bill for business address proof, NOC from the owner, and the rental agreement is the place is rented must be attached.

Change in the registered office address with a different ROC but within the state

Suppose the company wants to change the registered office from the jurisdiction of one ROC to another then the company has to apply for the approval of the Regional Director as prescribed in Form INC-23. After the Regional Director confirms the change the same confirmation must be filed with the ROC within 60 days. Within 30 days of filing, the ROC shall confirm the change of address.

Change of address in the same state but different ROC

In Large states like Maharashtra and Tamil Nadu there are two registrars of companies. At times it may happen that when the address of the company is changed the ROC also changes. Hence, there is a different procedure when such change happens.

Change of address in another state

The procedure to shift the registered from one state to another is a bit different from others. The MOA of the company changes as the registered office address also changes.

• It is necessary to hold a board meeting and pass a resolution to call an extraordinary general meeting.
• A special resolution is to be passed in the EGM about the change in the address of the registered office as well as for altering the MOA. The resolution must be filed in MGT14 within 30 days with the MCA.
• The company has to publish an advertisement for shifting the office not more than 30 days before the date of application to the regional director. It should be published in at least vernacular or the regional newspaper and in an English newspaper.
• The company should also send a notice to the creditors and the debenture holders if there are any and to other regulatory bodies as applicable to the company.
• An application to the Regional Director should be filed for shifting the registered office along with the documents that are specified.
• In case an objection is received then there is a hearing with the Central government and necessary orders will be passed. If no objection is received, then the order will be passed without any hearing.
• The confirmation received from the RD to the ROCs is to be filed by the company within 30 days from the date of the order.
• Within 30 days it is necessary to file form INC-22 to the ROC with the required documents.

The central government should dispose of the change of the registered office application outside the state within 60 days of the application and before passing the resolution it should confirm that the change is with the consent of the creditors, debenture holder, etc. The approval by the central government shall be filed with the registrars of both states. The ROC of the state wherein the new office will be located has to register the same and a new certificate of incorporation should be issued.

Rule 27: Notice and verification of change of situation of the registered office

The notice of the change in address of the registered office and the verification about the same shall be filled in form INC 22 along with the fees that are prescribed and shall be attached to the form above. The documents and how they are to be verified are mentioned in the terms of sub-section (2) of section 12.

The documents should be attached in the prescribed format with the Form INC-22 both for giving intimation of the registered office at the time of incorporation and the time there are changes in the registered office to verify the registered office of the company. The documents that are to be verified of the registered office are mentioned below:

• Suppose the registered office is owned by the company itself then the conveyance deed of the property is required in the of the company.
• In case the registered office is leased or rented then the lease deed or the rent agreement and the rent receipts are required. The rent receipts should not be older than one month.
• If the Director or any other person is the owner and the premises are not on lease by the company, the company is required to attach the proof that the company is permitted to use the place as the registered office. Then this may act as a ‘No Objection Certificate’ from the owner.
• Copies of the utility bills that are mentioned below should also be attached in all the above cases. The bill is required to bear the name of the company along with the address that is used as the registered address of the company. These bills should not be elder than 2 months.

• Mobile bill
• Telephone bill
• Electricity Bill
• Gas Bill

• Resolutions such as the special resolution and the board resolutions are to be passed.
• A Special resolution is to be passed in a general meeting if there is any change in the registered office to a place that is outside the local list of the city, town, or village where the office is currently located.
• A board resolution is to be passed to enable the authorization of the director and then submit the Form INC-22.

Once the receipt of approval for all the forms that are filed with the MCA the procedure for changing the address of the registered office gets completed. A company needs to update the address at all the applicable places. The new address should be changed on the PAN, TAN, Bank accounts, all other registrations, and the licenses, alteration in each of the MOA.

A director identification number (DIN) is a unique identifying number assigned to a person who wishes to become a director or is already a director of a corporation. DIN is obtained by submitting an application in eForm DIR-3, which was originally intended to be a one-time process for anyone wishing to become a director of one or more companies.

However, as a result of an amendment to MCA’s register, all directors with DIN are now required to submit their KYC details in e-Form DIR 3 KYC every year.

Purpose of the Form DIR-3 KYC

As mentioned above, Every director shall inform all the companies in which he/ she is a director, of the DIN allotted to him/her in Form DIR-3B within 30 days of the receipt of intimation of approval of DIN. Similarly, the Secretary and Manager of a company shall inform the company of their Income-tax Permanent Account Number (PAN). The company needs to further information about the DIN of the directors to the Registrar in Form DIR-3C within 15 days of receiving the intimation.

Who is required to submit Form DIR 3 KYC?

Directors are required to submit their KYC details to the MCA if they meet the following conditions, according to recent MCA announcements:

• Their Director Identification Number (DIN) was assigned to them by or on March 31, 2018
• DIN is in approved status

Note that KYC is also required of disqualified directors.

eForm DIR 3 KYC at a Glance

Any DIN holder who is filing his KYC details for the first time with MCA must file all KYC details only through eForm DIR-3 KYC. There is no option for such a person to access the web service for his KYC.

Further, any DIN holder who wants to update any information of his KYC details must update the same through the filing of eForm DIR-3 KYC only.

Form DIR-3 KYC Web

Any DIN holder who has already submitted eForm DIR-3 KYC in any of the previous financial years and who does not require an update in any of his KYC details as submitted may perform his annual KYC by accessing the DIR-3 KYC web service.

• Form DIR-3 KYC WEB is simply to verify the data filled by the DIN holder in his previous year’s eForm DIR-3 KYC.

Applicable Fee for form DIR-3 KYC

If Form DIR-3 KYC, is filed within the due date of the respective financial year, no fee is payable. However, if filed after the due date, for DIN status ‘Deactivated due to non-filing of DIR-3 KYC a Fee of Rs.5000 becomes payable.

Due Date for Filing DIR 3 KYC Form

Documents Required to File DIR 3 KYC form

The documents required to file reform DIR 3 KYC is as follows:

• Details of Nationality
• Details of citizenship like gender, date of birth, etc.
• Permanent Account Number (PAN)
• Passport (compulsory when DIN holder is of foreign nationality)
• Driving License
• Aadhaar card
• Personal Mobile and Email ID
• Proof of Residential address.
• Voters Identity card

Aside from the aforementioned documents, directors must additionally have the following items on hand:

• To file the form, he used his digital signature.
• CA, CS, or Cost Accountants who are currently practicing the professional attestation of the above-mentioned documents. In the event of foreign nationals, an attestation by a defined authorized person is required.
• A declaration signed by them (applicant/director) and attested by CA, CS, or Cost Accountants in good standing.

The process to file DIR 3 KYC Form

Step 1- Download the form

• The first and most important step is to obtain a copy of the DIR-3 KYC form from the MCA’s website.

The DIR 3 KYC form is attached for your reference.

Step 2- Fill in the DIN details

• The DIN must be filled in on the KYC form if the status is ‘Approved.’
• Directors who have had their DIN deactivated due to non-submission of the KYC Form can reactivate their DIN by filling out the form after the statutory due date and paying late filing fees.

Step 3- Fill out the DIR- 3 KYC Form with the required information

Name and relevant credentials

The applicant must enter his own first and last name, as well as his father’s first and last name. There are a few things to keep in mind:

• The director must give his name as it appears on his PAN card.
• The address provided in the form will be verified against the PAN database.
• Acronyms, single alphabets, and short forms are not permitted.

Nationality

• A director needs to declare his nationality
• Directors with foreign nationality must declare the nationality mentioned in their passport

Age Declaration

A director’s date of birth (DOB) must be entered in the DD/MM/YYYY Because anyone under the age of 18 is ineligible to file this application, an age declaration is required.

Address

A director’s permanent residential address must be entered and proof of permanent address must be attached. When the current residential address differs from the permanent residential address, the current residential address must be provided.

Note: A foreign pin code can be furnished only when the state selected is “NA”.

Step 4- PAN verification

Verification of the Permanent Account Number (PAN) is required. A director must first input his PAN, after which he must click the ‘Verify income-tax PAN’ button. The system next checks the director’s information using the PAN card number.

Note: For successful authentication, the PAN provided in the form must match the PAN indicated in the DSC. When foreign nationals do not have a PAN, the name on the form must match the name on the DSC in order for authentication to be successful.

Step 5- Update contact details and verify OTP

• A director must update his contact information by providing his phone number and e-mail address, both of which must be validated using an OTP.
• When a director inputs these contact details, he must verify them using an OTP by selecting the ‘Generate OTP’ button once they have been submitted. OTPs are issued to both the mobile number and the email address separately.
• Only directors who are not Indian citizens are permitted to use country codes other than +91/91/0.
• It should be remembered that an OTP can be issued to the telephone number and email address up to 10 times per day and twice every 30 minutes against one form.

Attested Attachments to be made

An applicant must attest and upload the documents listed above. Any additional attachments must be signed digitally by the applicant.

Step 6- Authentication of e-Form

The e-Form must be validated, which means it must be digitally signed by a Chartered Accountant/Cost Accountant or a Company Secretary who is licensed to practice their profession. The provision of the practicing professional’s information, as well as their digital signature, is a critical responsibility that cannot be overlooked.

After thorough proofreading, click the ‘Submit’ button.

Step 7- SRN Generation

When the e-Form DIR-3 KYC is successfully submitted, an SRN is produced and assigned to the user for future MCA correspondence.

Step 8- Email communication

On his personal email ID, the applicant will receive an email acknowledging receipt of the form. Once the email of approval is received, filing eForm DIR-3 KYC is complete.

Things to keep in mind while filing e-Form DIR-3 KYC

• When filling out this e-form, the director must provide their phone number and email address. A One-Time-Password will be used to verify this information (OTP)
• This e-Form will require directors to utilize their digital signatures.
• Directors must ensure that the e-Form is certified by a practicing Chartered Accountant, Cost Accountant, or Company Secretary.

Procedure to File Form DIR-3 KYC WEB

The procedure to File Form DIR-3 KYC Web is explained in detail below:

• The applicant needs to log in to the MCA portal with valid credentials. After login, click on the MCA service option and then select DIN services. From the list of services, select the DIR-3 KYC Web option.
• On the new page, Provide the DIN details, mobile number, and email ID that are preloaded will display on the page.
• By clicking on the Send OTP option, an OTP will be redirected to the applicant’s mobile number and Mail ID. Furnish the OTP to verify.
• Pre-loaded details of the DIN Holder will display, check all the details, and click on submit button.
• A zero rupee challan and SRN will be generated if the form is filed on or before 30th September.

The ownership of a Private Limited Company in India is decided by the shareholding of the Company. For inducting new investors or transferring the ownership of the company the shares of the company need to be transferred. The company’s interest could be sold to attract new investors or to pass the control of the company.

An important characteristic of the company is that the shares can be transferred. The shares or the debentures are movable property, they are transferable as they are provided by the articles of the company, especially the shares of any members of a public company.

The share transfer is possible only through a contract or arrangement between two or more persons. The provisions of the Companies Act majorly deal with the transfer and the transmission of the securities. The transmission of the securities due to death, succession, inheritance, bankruptcy, etc. The transfer of securities is possible through any contract or arrangement between two or more persons. The provisions of the Companies Act deals with the transfer and the transmission of the securities.

Transmissions of the securities mean the loss of titles on these securities due to death, succession, inheritance, bankruptcy, etc.

What is share transfer?

Transfer of shares means handing the rights and possibly the duties of a company member voluntarily. The rights and the duties of the share transfer happen from the shareholder who is wishing to not be a member of the company anymore to a person who is willing to be a member of the company.

Thus the shares in a company are transferable like any other movable property in the absence of the expressed restrictions under the Articles of the Company.

Who is involved in Share transfer?

• Subscribers to the memorandum
• The legal representative in the case of a deceased
• Transferor
• Transferee
• Company (Whether listed or unlisted)

Procedure to transfer the shares of Private Limited Company

There are certain restrictions over the transfer of the shares of the Private lImited company the following procedure should be followed to transfer the shares:

• At first, it is necessary to obtain the share transfer deed as required in the prescribed format
• This deed needs to be duly signed by the transferor and the transferee.
• Stamp this transfer of share transfer deed with his or her name, address, and signature.
• The transfer document or the allocation letter is to be attached to the share certificate and sent to the company
• The company should process the paperwork and the transferor should be granted a new certificate in case if it is accepted.
• The transferor will request the company to transfer his shares.
• A notice will be sent by the company to all the existing members that the above-mentioned shareholder has shown the intention to transfer the shares.
• In case if no existing member has shown interest in the company then the company will intimate the transferor that he can sell his shares to a nonmember.

Then the transferor will transfer the shares by the following process:

Form SH-4: This is the most important instrument of transfer through which the process is initiated. The transferor will have to submit the SH4 that is duly executed, dated, and stamped to the company. The SH4 contains the following information:

• Execution date
• CIN of the company
• Name of the Company
• Class of the securities
• Nominal value/ Amount called up/ Amount paid up of the securities.
• The securities that are to be transferred at a consideration or Rs… Distinctive no. of shares, certificate no.
• Name of the transferor along with his Folio No, Signature. Also the same should be witnessed.
• Name of the transferee along with the details like Father’s name, address, Email id, occupation, Folio, Signature.
• The instrument of the transfer should be duly stamped as per the Indian Stamp Act. of 1899.
• Once all the details are submitted then the same company will see if everything is in place and will register the same. A share certificate is issued and endorsed, to the transferee within one month of the receipt of the Instrument of Transfer.

Transfer of share by Physical mode

The ownership of the shares can be transferred by the delivery of the possession but there is a contractual relationship between the members and the company. When the transfer of the shares happens an instrument of transfer is required. Transferring the shares is a long procedure that starts with the agreement to sell and there is an execution of the deed of transfer and finally the registration of the transfer.

Transfer Deed

The transferor transferee should execute the share transfer deed as an instrument. This share transfer deed is to be duly signed and delivered to the Company along with the certificate that is relevant to the shares that are transferred. The company will not accept any instrument of the transfer which is not in confirmation with these provisions. In the physical mode, the transfer should be executed in Form SH 4.

Acknowledgement

At times the companies send an acknowledgment of the instrument to the transferor who has lodged a transfer with the company before scrutinizing the documents. This notice comes in the form of a letter that has a checklist for the scrutiny of the transfer documents. Some companies also issue transfer receipts. In case the transfer application is made by the transferor and payment for the shares of the company are partly made then the company should not have any objection to transferring the shares within 2 weeks from the receipt of the issued notice. The company is not statutorily obliged to give the notice to the transferor when the transfer of the documents is lodged by the transferee.

Scrutiny

A scrutiny should be done on the receipts of all the transfer documents to endure that all the documents are in place. If the transfer of the documents is not acceptable then they should be returned to the transferee. Also, in case if the signature of the transferor is different in the transfer instrument and the signature in the company’s record then the documents will be returned.

Approval

The Board of Directors or the committee has to approve every transfer of the shares. The registration happens only after the approval. The right authority is required to approve it if everything is accepted after the scrutiny and the transfer of shares must be allowed by the board. In the case of the Articles of Associations of the company is empowering the board to delegate the power of approval of share transfer that it may also delegate it to another committee which is not including the directors of the company.

Registration

Any share transfers us incomplete without the registration of the share transfer. A share transfer form is a document through which the transferee is agreeing to accept the shares. This becomes a legal contract with the company. Once the company approves and also registers the transferee’s name that is entered in the registry and it qualifies him as a member of the company. Maintenance of the register of the transfer is not a statutory requirement.

Delivery of Share Certificate

The transfer is effective only on the registration of such shares by the company. The company has to deliver the share certificate within 1 month from the receipt by the company’s instrument that is relevant to the transfer. The instrument of the transfer should be endorsed with the respective name of the transferee.

Timelines

Businesses with a share capital: The company should not (within 60 days of the execution) register any transfer of shares or ownership interest to any beneficial owners with proper instruments.

Application by the transferor: The transfer should not be registered until the company has notified the transferor within 2 weeks of the notice of the receipt.

No opposition certificate: In the following events the following timelines should be followed

• For memorandum subscribers- Within 2 months from the date of incorporation.
• Allocating all the shares of the company- within 2 months from the allocation date.
• Debenture allocation within 6 months of the allocation date.

Penalties

For company – Minimum penalty of Rs.25,000 and a maximum of Rs.5,00,000.

For an officer in default – The minimum penalty levied on an officer in default is Rs.10,000 and the maximum is Rs.1,00,000.

A Director in a company may want to resign or the Board of Directors may want to remove the Director for several reasons. The Director of a company can also resign from the Board by filing a resignation letter with the company and also intimating the ROC with the same. Here, we will take a look at the procedure that a director needs to follow in case he wants to resign from the post of Director.

Director’s notice of resignation to the company

After giving notice in writing to the Company a Director may resign from a company. The Board is required to intimate the ROC of this notice within 30 days in the form of DIR-12. If the Director chooses, he can also send a copy of the resignation letter to the ROC along with the reasons for the resignation using Form DIR-11. Here is the format for the resignation letter of a Director:

Director’s Resignation Letter Format

Date, Month, Year

To,

The Chairman / Secretary

Company Name Private Limited

City, State, Pin Code

Subject: Resignation from the Office of Director of the Company

Dear Sir/Madam,

I hereby tender my resignation from the office of the Director of the ————– (Company name) with immediate effect or mention the resignation date. Notice of my resignation letter should be submitted to the Registrar of Companies and the Board of Directors should be informed in the next board meeting as conducted.

I sincerely thank all the Board of Directors for giving me this opportunity and timely assistance to discharge my duties during my tenure as a Director of the company.

I request the Board of Directors to please provide me with an acknowledgment of the resignation and a copy of the E-form DIR-12 filed with the Registrar of Companies to that effect for my reference and record.

Thanking You,

Your’s Faithful,

Name of the Director.

Obligation on the part of the Director who is resigning from the post

• A director can resign from his office by submitting a notice in writing to the Board of Directors of the company. An email or a letter to the company is also a valid mode of communication.
• A copy of the resignation can also be forwarded along with the detailed reason for the resignation to the Registrar of Companies in Form DIR11 with the prescribed fees in the Companies Rules,2014 within 30 days from the date of resignation.
  *Effective date of resignation: It shall be in effect from the date on which the company has received the notice of resignation or the date the director has specified any. The effective date of resignation shall be the same as the date of cessation that is entered in the form DIR12.
• With DIR-11 the Director is also required to attach the following documents:

• Notice of the resignation that is filed with the Company (resignation letter can also be attached)
• Proof of Dispatch of the letter.
• If any acknowledgment that is received from the Company and is mandatory is the Director has selected Yes in Form DIR11.
• Other information can also be provided as optional attachments.

Obligations for the Company

• The Board of Directors shall take considers the notice of resignation that is received and accordingly the resolution should be passed by the Board of Directors for accepting the resignation and it is necessary to draft the minutes of the meeting of the Board of Directors.
• The Registrar should be intimated in Form DIR12 (According to Rule 15 of the companies,2014) the Board of Directors should be intimated within 30 days from the date the resignation is received.
• The board of directors should mention the resignation in the Director’s report of the annual general meeting and it should also be reflected on the website of the Company.
• The company is required to attach these documents while filing DIR1:

• The notice of resignation (Mandatory)
• Evidence of cessation (The board resolution or the acceptance letter can be attached)

Resignation Acceptance Letter by the company

Date, Month, Year

To

——— (Name of the Director who has resigned)

Address.

Subject: Acknowledgement of Resignation

Dear Sir,

With reference to your resignation letter dated ————-. In this regard, the Board of Directors has approved your resignation w.e.f. ———–, in the Board meeting held on —————.

The Board of Directors has sincerely appreciated your association with the company and the support you offered during your tenure. We wish you all the best in your future endeavors.

Thanking you,

Yours Faithful,

For ——— Company,

Director.

Liability of Director after the resignation

Once the Director has resigned and the Board has accepted his resignation, the Director is not liable for any liabilities that are incurred by the company after the date of acceptance of the resignation.

However, a Director is still liable for any offenses that have occurred during his or her as the director of the Company.

Process for Removing a Director

A Company can remove its directors before the expiry of its term, these powers are vested with the shareholders. Here we will talk about the process of removing the Directors of a Company. In case of Non-compliance with any one of these processes can make the decision void, if appealed in a court.

Basic Prerequisite

This process of removing the Director cannot be initiated without providing an opportunity to the Director who is to be removed. This is one of the basic requisites on the laws ordained which provides the defendant or the defaulter an opportunity of being heard.

Issuing Notice

This process of removing Directors must be initiated by a notice. This notice should be processed by the shareholders that have a minimum voting power of 1% or someone who holds shares on which an aggregate sum of not more than Rs. 5,00,000 is paid upon the date of the notice. This is a special notice that should be signed by all the members. This special note should be delivered to the Company at least 14 days before the meeting is held at which resolution will be passed. The notice won’t be valid if isn’t issued before three months of the date of the meeting.

Notice to Members

The Director must be sent a copy of the Notice, who will be heard on the resolution at the meeting, whether the director is a member or not a member of the Company. The notice should be served at least seven days which is a week before the date of the meeting which is held.

If the shareholders are not able to deliver the notice it can be published in any two newspapers, one in English and one in the vernacular newspaper. The notice must be mandatorily posted on the company’s website again this should be done seven days before the date of the meeting.

Representation in writing

The concerned director can make a representation against this removal notice. The director can request the company to send the representation to all the members. Also, the members should be notified of the representation by a notice. In case the company is not able to all the members the director may request for reading of this representation.

Appeal to the Tribunal

An application can be made to the tribunal if the organization or any aggrieved person decides against sending out the representation to the members or reading it out in the meeting, to request to nullify the process. The tribunal can also annul the process if it finds that the Director uses this right for unnecessary publicity for defaming purposes. This director is also given the right to issue an order demanding the director to cover the cost of the application borne by the company.